Call to clip the wings of fraudulent phoenix companies

The civil penalties around company phoenix activity impacting superannuation guarantee payments are still very modest and reflect 1993 standards, according to Melbourne Law School professor, Helen Anderson.

Appearing before a public hearing of the Parliamentary Committee inquiring into the non-payment of the superannuation guarantee, Professor Anderson referred to the findings of an inter-agency report on the regulation of fraudulent phoenix activity.

She said that report had made the point that the civil penalties relating to such activity were still very modest.

“They are still at their 1993 level. We think that those should be increased,” Professor Anderson said.

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However she said one the major recommendations with respect to enforcement was the need to “tweak of the Corporations Act to allow the liquidator or (the Australian Securities and Investments Commission) ASIC to bring an action to recoup from the newly created company the value of assets transferred across or any benefit that they have received”.

“Once again, we believe that phoenix exists because it is easy, it is cheap, it is invisible and it is incredibly profitable. So you just have to target those things and you will significantly take away the incentive towards phoenix activity,” Anderson said.

“If you could recover from the new company, which is obviously a separate legal entity, the value of what they have received from the old company that would perhaps disrupt and make phoenix just not worth the while,” she said.